Wednesday, December 17, 1997 Published at 07:45 GMTBusinessEncyclopaedia Britannica changes to survive

Peter Day of Radio 4's In Business programme reports on whether the best-known encyclopaedia in the world, Britannica, can survive in the modern world:

In a multimedia, wired up world, Britannica - for two centuries wedded to the book - is now effectively fighting for its life. And the Britannica dilemma is one faced by all the other huge corporations in the booming new world-wide information business.

They all know how to deliver the goods; nobody knows how to make money out of doing it.

Revered for generations, Britannica has suddenly been substantially outwitted by that 1990s phenomenon, the home computer.

But now this famous encyclopaedia, once the undisputed repository of all the knowledge in all the world, is making a tremendous effort to become one of the prime resources of the new Information Age. It's battling for its life.

In the beginning

Britannica was founded in the centre of Edinburgh just off the historic Royal Mile. An expert on Britannica,

Tom Nairn, from the Graduate School in Social Sciences at the University of Edinburgh, says that in the 1760s it was a place
"renowned for its drinking clubs, including the one frequented by William Smellie and his pals, who included the rogues and chancers who originally thought of 'Encyclopaedia Britannica' and got it going as a commercial business in imitation of France's 'The Encyclopédie'.

The first edition insisted in the very first words of the preface: "Utility ought to be the principal intention of every publication," and right from the start Britannica was useful and very successful.

In 1826, the Encyclopaedia was bought by the London firm of A & C Black, and its reputation followed the British empire world-wide.

Part of the new strategy

By the start of the 20th century, the great work was on the move again, sold to the Chicago salesman Horace Everett Hooper, who involved The Times of London in a furious campaign of cross promotion.

Tom Nairn says that the new American owners "had no scruples or inhibitions about this at all and realised that actually you could sell pretty impressive numbers of these items to people who did not have the educational attainment of the old elite but who wanted to."

Their methods differed markedly to those in Britain, where selling books from door to door like brushes was frowned upon.

Importantly, the aggressiveness of the sales techniques did not detract from the highbrown nature of the knowledge encapsulated in the volumes.

The company could not have done that kind of salesmanship without a product which stood up sufficiently well.

In his studies, Mr Nairn has detected "several different phases of success, followed by self-satisfied stagnation in which it was convinced that the way it was would last forever.

This happened in the late 19th century in London and the Americans realised that this was happening, moved in smartly and took it over.

"But then, two generations later, the same thing happened in Chicago in the 1950s and 60s, when it was a highly successful operation there. It succumbed again in the same way to a kind of conservative inertia in very rapidly changing circumstances provided by the information revolution."

Academic credibility

One of the key questions is whether, throughout its fluctuating commercial fortunes, Britannica managed to maintain credibility to scholars?

Professor Malcolm Bradbury at the University of East Anglia sees Britannica's origins as part of "the 18th century adventure ... part of the enlightenment, part of the age of reason ... The undertaking [of the encyclopaedia] is a mixture of the recognition of existing knowledge and the advancement of intellectual and social progress."

Professor Bradbury also feels that Britannica has - more or less - maintained its importance up to the present day: "During the 19th century, Britannica rose in importance, as Britannia itself did, and it does have an extraordinary reputation.

"There was a paradox in all this because the people who were buying the encyclopaedia often didn't realise the scholarly terms on which it was written. They didn't realise that you didn't really need Freud on psychology if you were doing school exams."

The coming of the CD-Rom

In the last five years, however, the coming of the home computer and the CD-Rom disc have seriously, perhaps fatally, undermined the concept of owning a shelf-load of encyclopaedias.

This shook Britannica to its roots, and left it not knowing how to respond.

CD-Roms can contain words, pictures, plus sound plus movie clips. In particular, the huge American computer software company, Microsoft, led by the wealthiest American of them all, Bill Gates, has produced eight million copies of its multimedia encyclopaedia, Encarta.

Microsoft's Gillian Kent says that the company thought encyclopaedias were ideal for multimedia products. Every household wants to learn, she says, and:

"the sound, the video start to bring the information to life and engage people ... There will undoubtedly be some people who would have bought the books in the past, but the books are a little bit more on the boring side - very good academically - but to engage and excite and draw people in, they didn't really have that.."

As you can imagine, that revelation came as terrible news for an organisation founded so firmly on the book as Encyclopaedia Britannica was.

Sales plummeted from 100,000 a year to just 20,000. In response, the company's new chief executive, Don Yannias, sacked all 440 staff selling directly to the home as he and a new owner struggled to get to grips with a desperate business situation.
He decided to concentrate on retail sales, making it available in bookstores, computer shops and online.

Mr Yannias said he and owner Jacob Saffra, a Swiss financier, bought Britannica because they loved the product and wanted to preserve the heritage of the book set but also with the idea that they "could help steer it into the next century to an Internet, on-line electronic world."

Problem identified - what is the solution?

Britannica is now trying to nail down problems faced by everyone in the information business.

First, what is the right delivery mechanism for information that we used to search the bookshelves for? Britannica is trying everything: books, CD-Roms with added video and audio like "Encarta", and a paid subscription that dials your computer into the whole encyclopaedia using the Internet.

But another key question is how much can you charge for these new services?

Not a half, not a quarter as much as Britannica used to charge for the books, which sell for $1,500. Up to now, the Internet has been the place where information is available free, apart from the phone call.

James Gulka, the company's chief operating officer, says that the Internet and, to some extent CD-Roms, have changed enormously the way people regard information. His says his strategy is to "ensure that we get Britannica in front of as many people as possible so they can use it, with low price points."

He points to Britannica being delivered online to over 40% of the university students in the United States. They pay very little each, but Mr Gulka argues that it is now "a quantity game".

He also says the company has had an "enormous response" for the new $125 CD-Rom version and is still selling print sets around the world despite the big difference in price.

Britannica's "BIG" idea

Britannica is also pinning its hopes for future revenues on something that takes it much further away from the volumes on a shelf and the CD-Rom versions, the Britannica Internet Guide, or BIG.

This is currently a free service which provides a guide to other sites on the Internet which Britannica recommends for more detailed information about subjects already covered by the encyclopaedia.

The idea is to provide some editorial intelligence, which the company thinks is missing on the Web. Editorial director Paul Hoffman recognises that Britannica cannot create every piece of content: "We want to rely on other people and point to their content when they're doing a good job. And we don't want to reinvent the wheel.

The "BIG" idea

"I think the encyclopaedia of the future is going to be a combination of our own original content in our tradition; other people's content that we work with; and then our ability as encyclopaedists to organise what's out there.

That's what we've always done in print and we can do that on the Web too."

On the question of revenues, Mr Hoffman says everyone has to be patient with the Internet at the moment because things are not easy to see.

"What's very clear," he argues, "is that in the US ... you have 20 million Americans that are on the Web right now and that's going up by leaps and bounds. Where you have people interested in subject matter, there will be people that pay for this, eventually. If you're in it to make a quick buck in a year, that's very unrealistic."

Chief executive Don Yannias agrees that the revenue models have not been clearly defined yet: "We are trying to remain flexible, we're trying to create a product that delivers before we worry about where the revenue is going to come from. It will come, it will come.

Whether it comes from subscription, whether it comes from sponsorship or even an outright advertising model, remains to be seen.

"If you go back a few decades, there was this new invention that everybody was talking about called the television and people didn't know how they were going to make money on the television. It's the same thing with the Internet. Something will evolve.

"It's somewhat of a gamble. With the on-line world you can't set a goal in stone and you can't set a plan in stone because it'll be changing every moment ... the Internet can be many different things and this is maybe we're the first incarnation of it. And where it goes from here is anybody's guess."

A gamble to survive

Bill Bass, Internet expert at Forrester Research in Boston, Massachusetts, agrees that it is a gamble. "Every company that's up on the Internet with information right now is losing money hand over fist," he says, "Everybody's betting on the fact that as more and more people use the Internet, this will become a profitable medium but nobody's seeing it as profitable in the near term, which is the next two, three years."

Hugh Look, editor of the newsletter Interactive Media International, believes that Britannica has done the right things so far: "They've made a useful and significant move to the Internet and most importantly, they've managed to make that psychological jump to saying we're in a low margin, high volume business and that's very, very important.

"The challenge for Britannica on the Internet is, of course, that everybody else is going to do this as well.

How far ahead are they going to be? Right now the brand name is probably going to get them a good few subscribers and the subscription model has been surprisingly successful on the Web for serious products.

"Although in the early days it was dismissed and people said you couldn't charge for information on the Web, the Wall Street Journal has really proved that wrong with its interactive edition and I think Britannica could succeed if they can do the marketing right."

Mr Look feels that the Britannica Internet Guide poses a real challenge to the company: "Why do I need an encyclopaedia if I can just go and search the Web and get a good article on the Russian revolution? Do I really need to go and look it up in Britannica? Do I need to have paid that amount of money for it?"

He argues that people aged 25 and under have different ideas: "They're interested in what's true now and not necessarily all the values of the past and understanding and analysing the past that Britannica has stood for."

Technology can wipe out businesses almost instantly: the Pony Express survived the coming of the transcontinental telegraph by just one week. Hugh Look thinks it is a "50-50 call as to whether Britannica will make it well into the 21st century, but the asset that it represents and the ideals that inspired it still have a very strong role to play in many forms of publishing, not just in reference publishing. So one hopes really very much that they do find ways of pulling through this difficult period."

In the thrusting world of media, thousands of professional eyes will be glued to the adventures of Encyclopaedia Britannica as it navigates the rapids of the Internet. It's unknown territory out there.